Related papers: Three little arbitrage theorems
Drawing insights from the triumph of relativistic over classical mechanics when velocities approach the speed of light, we explore a similar improvement to the seminal Black-Scholes (Black and Scholes (1973)) option pricing formula by…
Pricing financial derivatives, in particular European-style options at different time-maturities and strikes, means a relevant problem in finance. The dynamics describing the price of vanilla options when constant volatilities and interest…
We construct the first binary black hole solutions of Einstein-Maxwell theory in asymptotically anti-de Sitter space. The attractive force between the two black holes is balanced by the addition of a background electric field, sourced at…
This paper supplies two possible resolutions of Fortune's (2000) margin-loan pricing puzzle. Fortune (2000) noted that the margin loan interest rates charged by stock brokers are very high in relation to the actual (low) credit risk and the…
We derive the stochastic price process for tokens whose sole price discovery mechanism is a constant-product automated market maker (AMM). When the net flow into the pool follows a diffusion, the token price follows a constant elasticity of…
We find broad classes of exact 4-dimensional asymptotically flat black hole solutions in Einstein-Maxwell theories with a non-minimally coupled dilaton and its non-trivial potential. We consider a few interesting limits, in particular, a…
In this paper we present a simple, but new, approximation methodology for pricing a call option in a Black \& Scholes market characterized by stochastic interest rates. The method, based on a straightforward Gaussian moment matching…
We study how AI agents form expectations and trade in experimental asset markets. Using a simulated open-call auction populated by autonomous Large Language Model (LLM) agents, we document three main findings. First, AI agents exhibit…
Consider a finite set of trade orders and automated market makers (AMMs) at some state. We propose a solution to the problem of finding an equilibrium price vector to execute all the orders jointly with corresponding optimal AMMs swaps. The…
In this paper we study the short-time behavior of the at-the-money implied volatility for arithmetic Asian options with fixed strike price. The asset price is assumed to follow the Black-Scholes model with a general stochastic volatility…
This paper examines the pricing issue of margin-call stock loans with finite maturities under the Black-Scholes-Merton framework. In particular, using a Fourier Sine transform method, we reduce the partial differential equation governing…
We show how to derive the Black-Scholes model and its generalisation to the `exchange-option' (to exchange one asset for another) via the continuum limit of the Binomial tree. No knowledge of stochastic calculus or partial differential…
This paper studies the axiomatic bargaining problem and proposes a new class of bargaining solutions, called coarse Nash solutions. These solutions assign to each problem a set of outcomes coarser than that chosen by the classical Nash…
We present simple, analytic solutions to the Einstein-Maxwell equation, which describe an arbitrary number of charged black holes in a spacetime with positive cosmological constant $\Lambda$. In the limit $\Lambda=0$, these solutions reduce…
An option market maker incurs funding costs when carrying and hedging inventory. To hedge a net long delta inventory, for example, she pays a fee to borrow stock from the securities lending market. Because of haircuts, she posts additional…
We study asset price bubbles in market models with proportional transaction costs $\lambda\in (0,1)$ and finite time horizon $T$ in the setting of [49]. By following [28], we define the fundamental value $F$ of a risky asset $S$ as the…
This paper proposes the Exact Terminal Condition Neural Network (ETCNN), a deep learning framework for accurately pricing American options by solving the Black-Scholes-Merton (BSM) equations. The ETCNN incorporates carefully designed…
We study the range of prices at which a rational agent should contemplate transacting a financial contract outside a given securities market. Trading is subject to nonproportional transaction costs and portfolio constraints and full…
The studied model was suggested to design a perfect hedging strategy for a large trader. In this case the implementation of a hedging strategy affects the price of the underlying security. The feedback-effect leads to a nonlinear version of…
We investigate $f(T)$ theory coupled with a nonlinear source of electrodynamics, for a spherically symmetric and static spacetime in $4D$. We re-obtain the Born-Infeld and Reissner-Nordstrom-AdS solutions. We generalize the no-go theorem…